Question

Rob Herndon, an accountant with Southwest Airlines, wants to retire 50% of Southwest Airlines bonds by 2038. Calculate the payment Rob needs to make at the end of each year at 6% compounded annually to reach his goal of paying off $300,000 in 20 years.

Answer 1

Annual deposit= $8,155.37

Step-by-step explanation:

Giving the following information:

Calculate the payment Rob needs to make at the end of each year at 6% compounded annually to reach his goal of paying off $300,000 in 20 years.

To calculate the annual deposit, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (300,000*0.06) / [(1.06^20)-1]

A= $8,155.37